CHARTERED LOGISTICS LIMITED VERSUS C.C.E.-AHMEDABAD-II

Customs, Excise & Service Tax

 Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Service Tax Appeal No. 10858 of 2022- DB

 

(Arising out of OIO-AHM-EXCUS-002-COMMR-75-2021-22 dated 31/03/2022 passed by Commissioner of Central Excise, Customs and Service Tax-AHMEDABAD-II)

CHARTERED LOGISTICS LIMITED

VERSUS

C.C.E.-AHMEDABAD-II

APPEARANCE:

Shri Vikash Agarwal, Chartered Accountant, for the Appellant

Shri G. Kirupanandan, Assistant Commissioner(AR), for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C L MAHAR

 

Final Order No. 11540/2023

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 05.04.2023 DATE OF DECISION: 19.07.2023

 

 

The present appeal is directed against the impugned Order-In-Original No. AHM-EXCUS-002-COMMR-75/2021-22 dated 31.03.2022 passed by the Commissioner, CGST & Central Excise, Ahmedabad.

 

2. The brief facts of the case are that the appellant are engaged in the business of providing taxable services. On perusal of the data received from CBDT, it was noticed by the department that the appellant had declared less taxable value in their Service tax Return for the F.Y. 2015-16 as compared to the service related taxable value declared by them in their Income Tax Return (ITR)/ Form 26AS. A letter dated 06.10.2020 was issued to the appellant to explain the difference and to submit the documents in support thereof viz. Balance Sheet, Profit and Loss Account, Income tax Return, Form 26AS .etc. However Appellant have neither submitted the details nor submitted explanation for the vast difference noticed between service tax

 

return and Income Tax Return. Therefore, the Service tax liability of Rs. 23,63,40,566/- was worked out on the basis of income mentioned in ITR/Form 26AS, which were shared by Income tax Department. The said Income was considered as the total taxable value in order to ascertain the service tax liability under Section 67 of the Finance Act, 1994. Accordingly, show cause notice dated 21-10-2020 was issued proposing the Service tax demand along with interest and penalty. In adjudication, the Learned Commissioner vide impugned Order-in-Original confirmed the demand of Service Tax of Rs. 22,91,53,687/- and dropped the Service Tax demand of Rs. 13,57,00,973/-. He also imposed penalty of Rs. 22,91,53,687/- under Section 78 of the Act and penalty of Rs. 10,000/- each under Section 77(1)(C) and 77(2) of the Finance Act, 1994. Aggrieved by the impugned order-in-original the present Appeal has been filed.

 

3. Shri Vikash Agarwal, learned Chartered Accountant appearing on behalf of the appellant submits that the service provided by the appellant during the disputed period were exempt from payment of service tax, or were covered under the Reverse Charge Mechanism, except the clearing and forwarding services, which were negligible in monetary terms, and service tax was duly paid on the same by the appellant. The Appellant had provided only one taxable service, on which it had undisputedly discharged service tax, and reported the same in the ST-3 return. The Appellant had not discharged any service tax on the remaining exempt/ non-taxable services, which were also not reported in the ST-3 returns. Appellant had taken service tax registration in the year 2005 and they had been following the same practice of not reporting the exempted transaction since the year

 

• He further submits that the department issued letter to the appellant on 06.10.2020 asking reason behind difference. The details were requested for almost five years old period, and before the appellant could respond the letter dated 06.10.2020 with supporting documents, department issued the show cause notice dated 21.10.2020, which was only after 15 days from the letter dated 06.10.2020.

 

• He also submits that in case of GTA services, as per the Notification No. 30/2012-ST dated 20.06.2012 100% service tax was payable by the recipient of services, where the recipient was a factory or first stage or

 

second stage dealer registered under the erstwhile Central Excise Laws, or body corporate or a partnership firm. Further the activity of appellant is also covered under the negative list entry under clause (p)(i)(A) of Section 66D of the Finance Act, 1994. In Para 3 of the impugned Order –In-Original, the adjudicating authority has undisputedly accepted that except certain Ledgers, it was established that the appellant was engaged in transportation of goods by road, which was either covered under the Negative list vide Section 66D (p)(i)(A), or was exempt and covered under Reverse Charge where the consignor or consignee is liable to make payment of service tax.

 

• He further submits that on the one hand, the adjudicating authority very well accepted that as per the information and documents on records, the services of the appellant were services by way of transport of goods by road, which were either Exempt or covered under the Negative list, on other hand the Ld. Adjudicating authority had made assumptions with regards to certain Ledgers, which represented miscellaneous clients, to be not related to transport of goods by road service, without having observed any adverse information or without any reason recorded in the Order-In-Original. The department and Ld. Adjudicating authority had not found a single document which indicates that, for any particular transaction, the Appellant was not entitled to above exemption, or that reverse charges was not applicable on disputed particular transactions.

 

• He also submits that the Learned Adjudicating authority in the present matter held that it was difficult to ascertain that whether the recipient was covered or not covered under the specified person listed under the Notification No. 30/2012-ST which is related to Reverse charge mechanism. The demand was confirmed only on the basis of doubt and without any substance on records or reasons to have any such doubt.

 

• He also argued that entire service tax demand was confirmed by the Ld. Adjudicating authority based on the data received from CBDT by assuming that appellant provided the taxable services. However department in the present matter has not provided any corroborative evidence in support of their assumption. Department failed to discharge burden of proof to the effect that the appellant was liable to pay service tax on the income disclosed to Income tax department. He placed reliance on the following Judgments:

 

 

• P.Iscon Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad 2022(63)GSTL 64 (Tri. Ahmedabad).
• Union Of India  Garware Nylons Ltd. – 1996(87) ELT 12 (SC)
• Commissioner of Customs, Mundra  Sunrise Traders – 2022(382)ELT 23 (SC)
• Of C.Ex., Bangalore Vs. Brindavan Beverages Pvt. Ltd.- 2007(213)ELT 487(SC)

 

• He also submits that the show cause notice was time –barred and the extended period was wrongly invoked as there was neither suppression of facts, nor any wilful misstatement, with intent to evade payment of tax. Department invoked the extended period alleging suppression of facts, for the reason that the exempt/non-taxable services were not disclosed in the service tax returns, which were otherwise reported in the income tax returns, to the Income Tax department. The service tax department had granted service tax registration to the Appellant in the year 2005 and had conducted various audit from the year 2005 up to June 2017 and it had never objected to the Appellant with respect to the practice of not reporting the exempted or non-taxable turnover in the Service tax returns, or never intimated the Appellant that this practice could be considered as suppression of facts. Therefore, neither there was intent to evade payment of Service tax, nor to suppress any facts from the revenue, and hence, the adjudicating authority has grossly erred while invoking extended period of limitation, and therefore, the entire proceeding is liable to be quashed. He placed reliance on the following decisions:

 

• Pahwa Chemicals Pvt. Ltd. Vs. Commissioner of C.Ex. Delhi– 2005(189)ELT 257 (SC)
• ContinentalFoundation  Ventures Vs. Commr. Of C.Ex., Chandigarh –I- 2007(216)ELT 177 (SC)

 

Post hearing the appellant filed an additional submission on 09.05.2023, which is taken on record.

 

4. Shri Kirupanandan, Learned Assistant Commissioner (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.

 

 

5. Heard both the sides, carefully considered the submissions made by both sides and perused the case records.

 

• We find that in the present matter for confirmation of service tax demand against appellant revenue relies upon the data shared by the CBDT. The difference in taxable value was worked out by the revenue comparing the income declared by the Appellant in ITR/ Form 26AS vis-à-vis taxable value declared/ disclosed in ST-3 returns. Accordingly, the issue which require to be decided in this matter before us is whether Appellant is liable to pay service tax on such differential value.

 

• In the present matter when the Service tax is demanded on Income declared before the income tax authorities, it is the responsibility of the department to show that the said income are proceeds of the taxable services and appellant had rendered these services to customers with positive evidences. In the present case department failed to do so. Further on going through the impugned show cause notice we find that the show cause notice does not analyze any taxable activities carried out by the Appellant and whether the same would fall within the definition of any taxable service. It is settled principle of law that unless and until the clear analysis of the activity done by the assessee is carried out and classification of service is ascertained, demand of service tax only on the basis of data provided by the CBDT cannot be confirmed. We note that Revenue cannot raise the demand on the basis of such difference without examining the reasons for said difference and without establishing that the entire amount received by the appellant as reflected in said ITR returns and in the Form 26AS being consideration for services provided and without examining whether the difference was because of any exemption or non –taxable services, since it is not legally permissible to presume that the entire differential amount was on account of consideration for providing services. We further find that Income tax return and Form 26AS is not a statutory documents for determining the taxable turnover under the Service Tax provisions. The said documents are at the most relevant for Income Tax purpose only. Whereas under the Service Tax provisions, the service tax is chargeable on the taxable service provided. Thus, we find that the whole basis of show cause notice is incorrect. We, therefore, do not find the demand confirmed on the basis of Income Tax data to be sustainable.

 

 

• We also find that in the present matter for confirmation of service tax demand revenue has only relied upon the figures/ data provided by the Income Tax Department. The said figures / data were submitted by the appellant under the provisions of Income-tax Act. Income-tax and service tax are two different/separate and independent special Acts and their provisions operate in two different fields. Therefore by relying the Income tax data /ITR /26AS data under the Service Tax Law, demand of service tax cannot be made. We also find the support from the decision of M/s. Ved Security CCE, Ranchi-III – 2019 (6) TMI 383 CESTAT, Kolkata wherein it was held that the value of taxable services cannot be arrived at merely on the basis of the TDS statements filed by the clients inasmuch as even if the payments are not made by the client, the expenditure are booked based on which the Form 26AS filed, which cannot be considered as value of taxable services for the purpose of demand of Service tax.

 

• In the matter of Synergy Audio Visual Workshop Pvt. Ltd. Commr. of S.T. Bangalore – 2008 (10) S.T.R. 578 (Tri. – Bang.) = [2008] 14 STT 321

(Bang. – CESTAT), the Tribunal observed as under:

 

“The other ground is for confirming demands is that the appellants had shown certain amounts due from the parties in their Income-tax returns and Revenue has proceeded to demand Service Tax on this amount shown in the Balance Sheet. The appellants have relied on large number of judgments which has settled the issue that amounts shown in the Income-tax returns or Balance Sheet are not liable for Service Tax. In view of these judgments, the appellant succeed on this ground also. The impugned order is set aside and the appeal is allowed.”

In the matter of Calvin Wooding Consulting Ltd. v. Commissioner of C.Ex. Indore – 2007 (7) S.T.R. 411 (Tri. – Del.) = [2007] 9 STT 334 also Tribunal observed as under :

21. The liability of the recipient cannot arise merely from the fact that, the income-tax was deducted at source, which was the requirement of the Income- tax Act, on the recipient who made payment to the foreign supplier. Such a statutory requirement, as exists under the Income-tax law on the person making the payment to deduct tax at source, as a tax collecting agency of the Revenue, does not exist under the provisions of the Service Tax law, and no obligation was cast upon the recipient of the service to make any deduction from the amounts payable by way of consideration, under the statutory provisions. Authorization to pay Service tax under a contractual arrangement which obliged the recipient to pay the tax and file return, was a matter distinct and different from a statutory obligation to make tax deduction as a collecting agency, as envisaged under the

 

Income-tax law. The Commissioner (Appeals) has, therefore, rightly set aside the orders-in-original insofar as respondent of Service Tax Appeals Nos. 170, 171 and 173 of 2005 was concerned.

In the matter of Commissioner of C.Ex. Jaipur-I vs. Tahal Consulting Engineers Ltd. – 2016 (44) S.T.R. 671 (Tri. – Del.) the Tribunal also observed as under :-

“2. The brief facts of the case are that respondents are engaged in providing taxable service. Certain proceedings were initiated against them for not paying the Service Tax mainly on the basis of income-tax return filed by them at Jaipur. It is the case of the Revenue that the respondent failed to discharge the Service Tax on full taxable value as reflected in the income-tax returns. Accordingly, the original authority, after due process, confirmed the Service Tax of Rs. 8,25,789/- under the category of ‘Consulting Engineer service’. He also imposed penalties under various sections on the respondent. On appeal by the respondent, the learned Commissioner (Appeals) vide impugned order set aside the Order-in- Original and allowed the appeal. Aggrieved by this, Revenue is in appeal.

3. The main grounds of appeal is that respondent could not produce documentary evidence about Service Tax payment properly for the impugned period at Chandigarh and Lucknow. The ST-3 return filed at Chandigarh and Lucknow did not tally with income-tax return filed in Jaipur office.
4. We have heard the AR who reiterated the grounds of appeal. None represented the respondent.
5. We find that Commissioner (Appeals) examined the respondents appeal against confirmation of demand and allowed the same mainly on the groundthat income-tax return cannot be the basis for demanding Service Tax. Further, the respondent’s contention that they have rendered services outside the jurisdiction of Rajasthan and have discharged the Service Tax in Chandigarh and Lucknow, could have been verified with the concerned jurisdictional Chandigarh Commissionerate office. Departmental authority at Jaipur have no jurisdiction to proceed against the respondent for demanding Service Tax without any evidence of taxable service being provided within their jurisdiction. We find that there is nothing in the grounds of appeal which makes us to interfere with the finding of the learned Commissioner (Appeals). The appeal did not advert to any assertion as to how the Service Tax demand can be made when there is no evidence to any taxable service having been rendered in the Jurisdiction of Rajasthan. No inquiries have been conducted by the Revenue to support their case. As such, we find that present appeal is without merit and accordingly, the same is dismissed”

 

 

 

In the matter of Quest Engineers & Consultant Pvt. Ltd. Vs. Commissioner, CGST & C.Ex., Allahabad -2022(58) GSTL 345 (Tri-All.), the CESTAT also held as under: –

 

 

 

“12. Appreciating the facts and circumstances, we find that the allegations of Revenue are frivolous, that it was only on enquiry it came to know about the affairs of the appellant, i.e. providing of taxable service in view of the admitted facts that appellant is a registered assessee under the Service Tax provision, and have been filing their returns and paying tax. It is not alleged by the Revenue that the appellant was not maintaining proper financial records, register and vouchers for their transaction. We further find that Form No. 26AS is not a statutory document for determining the taxable turnover under the Service Tax provisions. We find that Form No. 26AS is maintained on cash/ receipt basis by the Income Tax Department for the purpose of tax deducted at source, etc. being the relevant data for Income Tax. Whereas under the Service Tax provisions, the service tax is chargeable on mercantile basis (accrual basis) on the service provided whether the value of such service is received or not. Thus, we find that the whole basis of show cause notice is incorrect and/or misconceived”

• We also find that absolutely no proper inquiry has been made by the department with the Appellant as regard the disputed difference. No statement in this regard asking them about the income declared to the incometax authorities has been  No evidence was produced by the department to show that the amounts declared by the appellant before the income tax authorities are pertaining to the taxable services. In absence of any such evidence, it cannot be said that the income declared by them to the income tax authorities is attributable to the taxable services provided by them to their clients during the disputed period. We find that in the case of CCE, Ludhiana v. M/s. Ramesh Studio & Color Lab [final order No. 581/2010- SM (BR) dated 30-4-2010] [2010 (20) S.T.R. 817 (Tribunal)] where similar service tax demand had been made against the respondent in similar circumstances, the Tribunal has upheld the Appellate order setting aside the service tax demand and penalty against the respondent. In the said matter tribunal held as under:

 

“5. Heard on perusal of the record, a query was made to the learned DR whether this allegation that the amount disclosed before the Income-tax authorities is corroborated by any evidence or not. The learned DR fairly agreed that the department has not done any exercise to support this allegation and there is no corroborative evidence or document on record to show-cause notice that the amount disclosed by the respondent before the Income-tax authority is an amount of taxable service. He fairly agreed that the appeal and stay application both can be disposed of at the same time.”

 

Similarly in the case of Kipps Education Centre, Bathinda v. CCE, Chandigarh reported in 2009 (13) S.T.R. 422 (Tri. – Del.), it was held by the Tribunal that income voluntarily disclosed before the income tax authorities could not be added to the taxable value unless there is evidence to prove the same. In this case also, there is no evidence to show that the income disclosed is the part of taxable service. In Para 36 of impugned order Learned Commissioner also admitted the said facts and held as under:

 

“It is also pertinent to mentioned here that the department has not adduced any evidence to substantiate the allegation levelled against M/s CLL other than the difference in taxable value as seen in the ITR & ST-3 Returns filed.“

 

• In view of the above legal position, we are of the view that thedemand of services tax is not sustainable on the basis of CBDT data or data provided by the Income tax department.

 

• Without prejudice, we also find that in the present matter Appellant submitted the documents like sales account, Income Ledger, sample copies of invoices and sample copies of LRs before the Learned Commissioner. The said documents clearly established that the services provided by the Appellant are in the nature of Goods Transport Agency service. We noticed that in terms of Notification No. 30/2012-S.T., dated 20-6-2012 on GTA service, service tax is to be paid by the recipient of services. We agree with the argument of Appellant that in cases where the service recipient is body corporate,partnership firm,  as specified in the said notification appellant does not become a person liable for payment of service tax.

 

• Weobserve that the adjudicating authority in his order assumed that it is not clear that whether the service recipients are individuals or body corporate for this reason he confirmed demand on the entire value. In this regard we find that the appellant in their additional submission given the details of service recipient of GTA, wherein all the service recipient are body corporate, dealer of excisable goods, registered factory, a partnership firm which are covered under exemption notification, whereby the service recipient is liable to pay service tax. Therefore, the assumption of the adjudicating authority is absolutely incorrect without any basis. We find that out of the total value which was taken for calculating the Service Tax demand on the part of the value pertains to the non-taxable transportation

 

service provided to GTA and not as a GTA and the same is covered in

„Negative List‟ vide Clause (p)(i) of Section 66D of the Finance Act, 1994 this transaction is also not taxable being covered under „Negative List‟.

 

 

• Further we also noticed that in cases of transporters to whom vehicle has been given for transportation of goods and LRs/ Consignment Notes is prepared by the other transporter, demand of service tax is not sustainable on such transaction, the same is also exempted as per the Sl. No. 22 (b) of Notification No. 25/2012-ST dated 20.06.2012 as amended. The relevant entry provided as under:-

 

22. Servicesby way of giving on hire –

(a) ,

(b) to a goods transport agency, a means of transportation of goods;

 

• We also find that in the present matter Ld. Commissioner acceptedthat the services of the appellant are pertaining to the GTA and we find that the same are either exempted at the end of the Appellant or exempted or covered under the Negative list. In such circumstances also demand of Service tax not sustainable in the eyes of law.

 

• Withoutprejudice to the above, we find that the Adjudicating Authority also raised dispute that since the appellant have availed the Cenvat credit on the input service they are not eligible for abatement under GTA service. In this regard the appellant has vehemently submitted that Cenvat was availed only with respect to loading and unloading activity, on which Service Tax was duly paid. We find that there is no dispute about the fact that the appellant have discharged the Service Tax on the independent services of loading and unloading, therefore, the credit taken attributed to such service will not affect the eligibility of abatement provided for the service of GTA. Therefore, the contention of the adjudicating authority has no basis accordingly, it cannot be accepted. Assuming, if at all Cenvat is availed on input service for loading and unloading, the said activity being independent and not related to GTA in the present case, the abatement available in respect of GTA will not be affected adversely.

 

• The impugned order confirmed a small amount of demand based on mention of words “loading and unloading” in narration of Ledger Entry. In this regard we agree with the submission of the appellant that the loading and unloading activity being incidental to service of GTA on which Servicetax is payable on reverse charge basis by the recipient of service. Therefore, demand on this basis against the Appellant is absolutely incorrect and 

 

 

• Theimpugned order also alleged that the appellant failed to submit the ST-3 returns for April-17 to June-17. In this regard we find force in the submission of the appellant that they duly filed the said return online which is also available on ACES portal the same is accessible to the Adjudicating Authority. Moreover, without prejudice to above fact, merely for not filling of ST-3 return, when there is no liability of service tax, no demand or penalty on this count is sustainable against the appellant.

 

• We find that the appellant have vehemently argued that the demand of extended period is not sustainable as no suppression of fact or mala fide exist on the part of appellant. In this regard, on going thru the facts we find that Department has invoked the extended period alleging suppression of facts, for the reason that the exempt/non-taxable services were not disclosed in the service tax returns. It is observed that the appellant obtained service tax registration in the year 2005 and the department had conducted various audit from the year 2005 up to June 2017 and it had never objected to the Appellant with respect to the practice of not reporting the exempted or non-taxable turnover in the Service tax returns, or never intimated the Appellant that this practice could be considered as suppression of facts. Therefore, neither there was intent to evade payment of Service tax,nor to suppress any facts from the revenue, and hence, the adjudicating authority grossly erred while invoking extended period of limitation, and hence, the entire proceeding is liable to be quashed on the ground of time bar also. The above view is supported by the following Judgments:

• In the case of Pahwa Chemicals Pvt. Ltd Vs. Commissioners ofCentral Excise, Delhi reported in 2005 (189) ELT 257 (Supreme Court) the Hon‟ble Apex Court held that mere failure to declare does not amount to wilful mis-declaration or wilful suppression and there must be some positive act on the part of the party to establish either wilful mis-declaration or wilful  The Apex Court further held that

 

when the facts are before the department and the party is in the belief that affixing of label makes no difference, does not make a declaration, there would be no wilful mis–declaration or wilful suppression. If the department felt that the party was not entitled to the benefit of the notification it was for the department to immediately take up the contention that the benefit of the notification was lost.

• In the case of Continental Foundation Joint Venture Vs.Commissioner of Central Excise Chandigarh–I reported in 2007 (216) ELT 177 (SC) the Apex Court held as under:

“10. The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.”

 

 

• In the judgment of the Hon’ble Supreme Court in the case of Tamil Nadu Housing Board Vs. Collector of Central Excise, Madresreported in 1994 (74) E.L.T. 9 (SC), wherein the Apex Court held that limitation for extended period invokable only if existence of both situations (1) suppression, fraud, collusion etc. and (2) intent to evade payment of duty proved. The Apex Court further held that once the Department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the Section, then only the burden shifts on the assessee.

From the above judgments, coupled with the facts in the present case discussed above the demand for the longer period is hit by the limitation also.

 

 

• Without prejudice to the above discussion we find that the show cause notice was admittedly issued only for the period 2015-16, whereas the demand in the Order–in-original was confirmed for 2015-16, 2016-17 and 2017-18 (up to June 2017) which is a serious error on the part of the adjudicating We find that when no demand was raised in show

 

cause notice as no quantification was made, the demand cannot be confirmed in the adjudication order without quantifying the demand in the show cause notice, for this reason also the demand for the period which was neither quantified nor raised in the show cause notice is ab-initio, void and illegal and the same is not sustainable on this ground alone.

 

 

6. As per our above discussion and findings, the demand of Service Tax, interest and penalty is not sustainable and the same is accordingly set  The appeal is allowed in the above terms with consequential relief, if any, in accordance with law.

 

(Pronounced in the open court on 19.07.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

(C L MAHAR) MEMBER (TECHNICAL)